"Local Market Accessibility" Rated as Most Important Determinant, Again Underscoring Emphasis on Achieving Top Line Growth

The focus on Local Market Accessibility and Good Local Partner followed by Political Stability and Protection of Intellectual Property again underscore emphasis on top line growth. Incentives, Government Support and "One Stop" Service – while slightly positive -- were accorded the lowest importance.

Respondents rated "Local Market Accessibility" (7.56) highest, again underscoring a desire to see international expansion as a means to achieve top line growth. This was followed closely by "Good Local Partner" (7.42). "Political Stability" (7.38), "Protection Intellectual Property" (7.35) and "Financial Structure" (7.14). "Physical Infrastructure" (6.55) was also a concern, as was "Corporate Governance" (6.49), "Regulatory Issues" (6.38), "Affluence of Market" (6.10), "Advisory/Professional Support" (5.97) and "Human Resources" (5.74). While still positive "Incentives" (5.66), "Government Support" (5.56) and "’One Stop’ Service" (5.14) were rated as the lowest in importance. The deviation, while notably lower than the previous two questions, was still relatively high both in general and within the higher overall deviation in this survey, reflecting a continuing divergence of opinion, size, and more than likely experience, among respondents as to realizing their international expansion needs.

This continuing emphasis on factors that relate more strongly to initiating sales, rather than sourcing activities, is again reflective of a desire to view international expansion as a means to expand global market share and revenue. As a result, it should not be surprising that respondents emphasized factors such as "Local Market Accessibility", "Good Local Partner", "Political Stability", "IPR Protection" and even "Financial Structure" – all of which are essential both to realize revenue growth and a larger commitment of resources – as opposed to "Incentives", "Government Support" and "’One Stop’ Service" which provide more benefit to those looking to minimize costs and add little value to sales/marketing if underlying fundamentals do not exist.

The protection of intellectual property was a continual theme in the comments and follow-up discussions. Much was made of the dangers of operating in an environment where the cost of legal services and lack of a tradition of IPR enforcement to the same extent enjoyed in the US creates a real and formidable barrier. Some respondents, while acknowledging the problem, expressed views such as, "Patent protection overseas is very difficult. You need to pick something they don’t want to make. Fortunately that describes what we do."

A similar point was raised by a West Coast Technology Sales Rep who stated "Simple truth is while we’re fighting over patents, the other guys are eating our lunch. I saw one deal where two companies partnered. One got US & Europe, the other Asia. In US they were embargoed due to patent infringements. In Asia they sold freely and did very well. I know another CEO who was looking for a US company to supply a product. It was so difficult to work through IPR contract they went to Taiwan and did it for a fraction of the price and had no concerns about IPR as time to market and price point were far more important. That is why I rated IPR as not important. While we are bickering over copyright, CD/DVD’s and other products are sold all over China for $1."

A Design Consultant offered a different view and emphasized the need for US firms to focus on branding and innovation. He noted, "American companies need to be smarter. It is not only through patents. Branding is also important, and one must negotiate with competitors directly and form relationships. Companies also need to understand Asian economies and customs. Apple introduced the MP3 in Japan and immediately there were many competitors. Bur the Apple iPod is still successful because Apple is analyzing the market closely and introducing new innovations and products. But most American companies just release a product and try to protect it through patents and brand name, rather than continual upgrades and enhancements."

The question of infrastructure and human resources were examined by one Consultant who has been helping to establish R&D facilities in Asia. He noted, "A lot of time in China and India they just make things or design things already planned out. They are not as good at making R&D. We find overseas they have a lot of talent but no ability to be a systems house and there is a lot of IP in the states that we can leverage there. So we help them be a software consulting firm. Logistics remains very hard there. It is so hard to get things done. Overseas, there is less of a comfort level. Even obtaining components are hard to get in India when we are talking about R&D prototypes. Over there they are more into volume."

When examining the importance of regulatory issues, the Chief Electrical Engineer for a Medical Equipment Company noted "We do the R&D in-house here in New Jersey and everything else is done outside, manufacturing in Taiwan and final assembly in Ireland. We are forced to be international in sales as we manufacture medical devices and do not yet have approval to market in the US. We intend to get that over time. For the moment we will sell in Asia, Europe and AUZ where we have patent protection. You need to have $8-10 million and five years to make a clinical study the US. Ultimately we will do that. In Australia, Japan, we can do it right away. The US is the only country that restricts this. You can unofficially sell it here but not make any claims."